Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: berniemadeoff on August 04, 2013, 01:35:21 PM

Title: LC RIP - Aug 2013
Post by: berniemadeoff on August 04, 2013, 01:35:21 PM
Given the paltry amount of loans I've been getting with Auto Invest (E-G, 400+), looks like we're now shut out of LC.  RIP

Time to go back to playing the stock market.   :'(
Title: Re: LC RIP - Aug 2013
Post by: yojoakak on August 04, 2013, 04:12:01 PM
Given the paltry amount of loans I've been getting with Auto Invest (E-G, 400+), looks like we're now shut out of LC.  RIP

Time to go back to playing the stock market.   :'(

There's $11 trillion in outstanding Consumer Debt.

Why is it so hard for LendingClub to find people to loan money to?
Title: Re: LC RIP - Aug 2013
Post by: Dennis on August 04, 2013, 05:40:45 PM
Personally I'm doing okay with Lending Club.  I found about 125 notes in July that met my criteria and so far in August I'm still finding them, although it hasn't been easy.  I do not use automated software, my notes are all hand picked.  That said, I have to be VERY fast at purchasing notes at their issue times throughout the day.  Most of the ones that fit my criteria go in seconds, minutes at most.

On the other hand, Prosper has become almost impossible to manage.  I'm barely keeping up with reinvestment and have no chance of adding new funds until Prosper finds a way to bring more borrowers to the platform.  It would seem that we've reached a point on both lending platforms where growth is being limited only by supply.  But if Prosper could find enough borrowers, I believe it would grow to profitability very quickly, of course Lending Club is already there.

Finding borrowers may be the biggest challenge to growth going forward with P2P.  We all know though that there are plenty of debtors out there, but the challenge will be bringing the qualified ones to these boards.  It should be interesting to see how well Lending Club and Prosper does at addressing this.
Title: Re: LC RIP - Aug 2013
Post by: rawraw on August 04, 2013, 06:22:19 PM
Yea, it's either E-G loans or the stock market.  There isn't any other options out there :)   How is Puerto Rico bonds doing?
Title: Re: LC RIP - Aug 2013
Post by: JDowding on August 04, 2013, 07:03:48 PM
I seem to be doing okay, still willing to take a mix that includes A-C loans.   
Title: Re: LC RIP - Aug 2013
Post by: Dennis on August 04, 2013, 07:05:49 PM
Yea, it's either E-G loans or the stock market.  There isn't any other options out there :)   How is Puerto Rico bonds doing?

I'm not sure I understand your comment.  Are you suggesting you can't find enough A - D notes, or do you find A - D notes undesirable?  C and D notes have been the easiest for me to find, and with returns of 13.68% - 20.31% I find them very desirable, but you have to be fast at getting them.  E and F are the most difficult to find, but I am finding them and I have what I consider pretty conservative criteria.  The best notes (subjective) will go very very fast at any grade so you do have to work a little.
Title: Re: LC RIP - Aug 2013
Post by: SarahV on August 04, 2013, 07:53:55 PM
E-G/400+ is an extremely restrictive filter... you're throwing out 98% of all loans before you even start. Of course you'll have trouble finding enough of them if things get a bit competitive. You think every other Interest Radar user isn't looking for those same exact loans? It's probably the first filter set everyone tries when aiming for high-interest loans on IR.

Try a custom filter giving you 395+ or 397+ for IR01. Try a custom filter including notes over 18% or 19% interest rate instead of E-G. You'll pick up extra loans that the lazier filterers won't get and they're going to give you a very similar return to your E-G 400+.
Title: Re: LC RIP - Aug 2013
Post by: berniemadeoff on August 04, 2013, 08:44:33 PM
Yea, it's either E-G loans or the stock market.  There isn't any other options out there :)   How is Puerto Rico bonds doing?

PR bonds are doing great.  5% tax free baby and no defaults yet!
Title: Re: LC RIP - Aug 2013
Post by: berniemadeoff on August 04, 2013, 08:48:16 PM
E-G/400+ is an extremely restrictive filter... you're throwing out 98% of all loans before you even start. Of course you'll have trouble finding enough of them if things get a bit competitive. You think every other Interest Radar user isn't looking for those same exact loans? It's probably the first filter set everyone tries when aiming for high-interest loans on IR.

Try a custom filter giving you 395+ or 397+ for IR01. Try a custom filter including notes over 18% or 19% interest rate instead of E-G. You'll pick up extra loans that the lazier filterers won't get and they're going to give you a very similar return to your E-G 400+.

I could relax the filter, but I see that every one is finding loan availability an issue that is getting worse by the day.  I expect my returns will gradually diminish over time and soon become unattractive vs. other asset classes.  I was afraid this would happen eventually but not this soon.
Title: Re: LC RIP - Aug 2013
Post by: SarahV on August 04, 2013, 09:21:53 PM
It's your choice when to give up and what return is worth it to you, of course. For me it's a small part of my portfolio, I consider it an experiment, and it's not a huge deal if I make one percent more or less.
Title: Re: LC RIP - Aug 2013
Post by: berniemadeoff on August 04, 2013, 09:35:21 PM
It's your choice when to give up and what return is worth it to you, of course. For me it's a small part of my portfolio, I consider it an experiment, and it's not a huge deal if I make one percent more or less.

Take the returns while you can get them..  they probably won't last.
Title: Re: LC RIP - Aug 2013
Post by: investforfreedom on August 05, 2013, 12:05:47 AM
Personally I'm doing okay with Lending Club.  I found about 125 notes in July that met my criteria and so far in August I'm still finding them, although it hasn't been easy.  I do not use automated software, my notes are all hand picked.  That said, I have to be VERY fast at purchasing notes at their issue times throughout the day.  Most of the ones that fit my criteria go in seconds, minutes at most.

On the other hand, Prosper has become almost impossible to manage.  I'm barely keeping up with reinvestment and have no chance of adding new funds until Prosper finds a way to bring more borrowers to the platform.  It would seem that we've reached a point on both lending platforms where growth is being limited only by supply.  But if Prosper could find enough borrowers, I believe it would grow to profitability very quickly, of course Lending Club is already there.

Ditto.  I am still okay with LC, but Prosper is just impossible.  Not only are there few quality D and E loans, the good ones are gone in literally seconds.  Too much front-running by the institutions and big investors using auto-invest.

Finding borrowers may be the biggest challenge to growth going forward with P2P.  We all know though that there are plenty of debtors out there, but the challenge will be bringing the qualified ones to these boards.  It should be interesting to see how well Lending Club and Prosper does at addressing this.

My view is that there is just too much money going after too few borrowers.  Regardless of how many new borrowers come onto the platform, there is always ever more institutional "hot money" floating around to scour for yields and other asset classes.  (Corporations have been hoarding so much cash these days--for the past few years after the financial crash of 2008.) 
Title: Re: LC RIP - Aug 2013
Post by: Fred on August 05, 2013, 03:02:41 AM
berniemadeoff, sad to see you leave!

On the other hand, I take a comfort on having 1 fewer competition. :)
Title: Re: LC RIP - Aug 2013
Post by: berniemadeoff on August 05, 2013, 06:45:51 AM
berniemadeoff, sad to see you leave!

On the other hand, I take a comfort on having 1 fewer competition. :)


I'll keep adding new money and reinvesting until I can't get any more loans. It seems that day may be coming soon.
Title: Re: LC RIP - Aug 2013
Post by: rawraw on August 05, 2013, 07:46:49 AM
Yea, it's either E-G loans or the stock market.  There isn't any other options out there :)   How is Puerto Rico bonds doing?

I'm not sure I understand your comment.  Are you suggesting you can't find enough A - D notes, or do you find A - D notes undesirable?  C and D notes have been the easiest for me to find, and with returns of 13.68% - 20.31% I find them very desirable, but you have to be fast at getting them.  E and F are the most difficult to find, but I am finding them and I have what I consider pretty conservative criteria.  The best notes (subjective) will go very very fast at any grade so you do have to work a little.
I was being slightly facetious.  LC isn't built around the E-G notes.  I use a barbell strategy of sorts and have a few to up the average return, but I'm having no problems finding notes (generally BCD).  I'm still earning my double digit return which is plenty for me -- but I've never been on the edge of credit quality like many here, so I'm not used to getting those DEG notes in the first place.
Title: Re: LC RIP - Aug 2013
Post by: New Jersey Guy on August 05, 2013, 12:47:29 PM
Even on the secondary market, E-G notes rarely pass even a loose filter.  I'll get the chance to grab an occassional E note, but F and G are nearly impossible to get unless you're looking at 60-month term.  Even then, the number of 60-month E and G notes issued are much smaller than the other grades.

I totally agree with Rawraw's last statement.  I'm happy with the 16% I'm making on that particular portfolio. 

Like him, my Buy/holds are mainly C and D with a few lower grade B4 and B5 in the mix.  Very, very few E,F or G.
Title: Re: LC RIP - Aug 2013
Post by: PennySaved on August 05, 2013, 05:55:03 PM
I am very happy with getting B and C loans on Lending Club with occassional D.  If I can get a B loan with double digit interest rate, that is still better than  the ordinary savings rate.  I am not despairing over not getting 20% return versus 10%.  I do have some E, F and G, but they are older loans. But I too feel the party might be over some day....So i keep reinvesting and adding new money in occassionally.  So far, I am up to $16,237 invested after starting with my "experiment" in 2009 with a couple hundred dollars.

I even started putting money back into Prosper as I am more hopeful for its success now.  Again, I have no problem getting only AA, A and occassional B loans.  Better returns than conventional savings without the wild swings of the stock market.
Title: Re: LC RIP - Aug 2013
Post by: New Jersey Guy on August 05, 2013, 06:21:30 PM
"So far, I am up to $16,237 invested after starting with my "experiment" in 2009 with a couple hundred dollars."

Impressive!  I started last October with $400 and went into the New year with $600 out of pocket.  I, too, wanted to continue my "Experiment" with just that amount.  But like alot of others, I got caught up in it and have been adding money on a monthly basis.  I'm sure you'll see my IRR drop the next time I update it due to added funds.

Title: Re: LC RIP - Aug 2013
Post by: Fred on August 05, 2013, 07:38:32 PM
LC published a study on how LC notes performed better than stocks and bonds for the 2007-2012 period.

http://blog.lendingclub.com/2012/11/07/five-year-review-lending-club-notes-outpace-stocks-and-bonds/

This year, stocks probably will do well -- SP500 is about +20% so far -- but anyone in equity should have the stomach to go through a -5% drop within a few days, which happened in June this year.
Title: Re: LC RIP - Aug 2013
Post by: Fred on August 05, 2013, 08:03:35 PM
But like alot of others, I got caught up in it and have been adding money on a monthly basis.

Those double-digit returns are addictive.   ;)
Title: Re: LC RIP - Aug 2013
Post by: berniemadeoff on August 05, 2013, 09:19:45 PM
LC published a study on how LC notes performed better than stocks and bonds for the 2007-2012 period.

http://blog.lendingclub.com/2012/11/07/five-year-review-lending-club-notes-outpace-stocks-and-bonds/

This year, stocks probably will do well -- SP500 is about +20% so far -- but anyone in equity should have the stomach to go through a -5% drop within a few days, which happened in June this year.

No pain, no gain, as they say.  This is a hated bull market and it suits me just fine.

Picking 2007 and 2012 is a convenient timeframe.  They won't be able to boast this claim going forward on a rolling basis, as least not vs. equities.  Including tax drag from interest, the outperformance in stocks pull ahead even further.
Title: Re: LC RIP - Aug 2013
Post by: GS on August 05, 2013, 10:24:37 PM
I was thinking the same thing.  From 2009-2013 I'm sure the stock market did better than LC, but 2007-2009 was a death spiral ... I've read the average long term return on the S&P is 10%, using the 1950s as a starting point.
Title: Re: LC RIP - Aug 2013
Post by: Fred on August 06, 2013, 01:21:18 AM
1. Don't get me wrong, I do not discourage anyone going into equities.  I myself have bigger positions in equities than in P2P notes.  I know people are always looking for alpha.  But for me, having been exposed to -100% to +300% swings, my goal now is to maximize Sharpe ratio, not alpha.

2. If you notice, LC's report was published in Nov 2012, so I don't think they picked the period out of convenience per se.  It was the "latest" as of the time of writing.
Title: Re: LC RIP - Aug 2013
Post by: berniemadeoff on August 06, 2013, 01:27:25 AM
Fair enough.  But it likely will be the last time they can make this claim.

Sharpe ratio is ok, but I'm all about beta and low costs. Alpha is a total crap shoot.
Title: Re: LC RIP - Aug 2013
Post by: Amelia on August 06, 2013, 09:12:59 AM
I'm just about to pull the trigger on a Roth IRA roll over even though it took two tries to invest a measly $125 this morning right at the bell. 

But, since I believe for the average Joe investing in the stock market is 80% emotional/confidence vs. market knowledge I feel more confident and in control of my money here even though it will take some solid clock watching to get the funds I'm looking for during the load times.

Started in May and just now got my initial $8000 fully in the system.  Everything else is reinvesting now.  Starting with the Roth money, I'll be much more focused on getting as many loans started at the beginning of the month and hopefully they'll post by the first of the following month.  I can also now up my loan amount which will help (I hope).

The journey continues for me at LC.
Title: Re: LC RIP - Aug 2013
Post by: PennySaved on August 06, 2013, 06:58:18 PM
I started a Roth IRA this year in Lending Club putting in $6500 in January.  It took me about two months to get it all invested. This is separate from my regular Lending Club account.  I plan to put another $6500 (I'm over 50) in the LC Roth in January 2014.  It is good to have LC funds in a Roth because then you don't worry about taxes on the interest. 

My regular LC account I could count on as emergency cash if I decided to withdraw the loan repayments (~$400 per month) instead of re-investing them.  The Roth I don't plan to touch for a long long time.  I already have a diffierent Roth that is invested in stock funds.
Title: Re: LC RIP - Aug 2013
Post by: Dennis on August 07, 2013, 12:51:45 AM
I started a Roth IRA this year in Lending Club putting in $6500 in January.  It took me about two months to get it all invested. This is separate from my regular Lending Club account.  I plan to put another $6500 (I'm over 50) in the LC Roth in January 2014.  It is good to have LC funds in a Roth because then you don't worry about taxes on the interest. 

My regular LC account I could count on as emergency cash if I decided to withdraw the loan repayments (~$400 per month) instead of re-investing them.  The Roth I don't plan to touch for a long long time.  I already have a diffierent Roth that is invested in stock funds.

Hello:

I've been putting $6,000 in a Lending Club IRA for 3 years now (another $3,000 on the way for this year).  In addition, I have another Lending Club account and a Prosper account for additional funds not allowed in the IRA because I thought I was maxing out that account at $6,000/per year.  I'm over 50, did I miscalculate on what is allowed?  $6,500 is the max???  Another $500 isn't much, but I'd rather that $500/year be invested tax free (actually, tax deferred). 
Title: Re: LC RIP - Aug 2013
Post by: thezfunk on August 07, 2013, 12:51:06 PM
I am no tax professional but I believe this year the limits went up to $5500 and $6500 for Roth IRAs.
Title: Re: LC RIP - Aug 2013
Post by: PennySaved on August 07, 2013, 01:13:44 PM
For 2013, if you are over 50, you can contribute max of $6500.  For us Fifty-Somethings, the max amount increased by 500 over the 2012 contribution limit of $6,000. 

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits
Title: Re: LC RIP - Aug 2013
Post by: cfb on August 15, 2013, 02:11:18 PM
I'm having the same set of issues.  Struggled to get 50k invested earlier last year and had to take a lot of low interest loans and relax my filter significantly and it still took three+ months to get it all in play.  Had no problems finding 10-15 loans a day after that for further investment and reinvesting.  My defaults are decent with my filters, and I'm getting a 12.6 NAR after about 18 months.

However, last couple of months I'm fighting to get one or two notes a day and half of them don't issue.  Between the institutional and autoinvests the 'good' notes I'm looking for disappear in minutes.  While a few months ago it was routine to see 200-400 notes in inventory, I'm seeing 25-40 at some points during the day.

I won't do the autoinvest because they don't allow the filtering I want (no low income, no high payment to income ratio, I don't mind 25-30k in debt but I'm not interested in 40k+, for example) and the surcharge would eat into my returns.

Definitely not seeing anything else out there to put money into.  The stock market seems to have hit its apex on the cycle, the bond market is headed for a wall, cash investments give negative returns, and real estate around my area has picked up to the point where some properties are selling for well above what they're worth...again.

LC is really starting to take more time than its worth at this point, and its not very productive for me anymore, unless I want to take lower interest loans or take on more default risk.  Its only a small part of my net worth, but it WAS a nice cash slush fund where I could pull a few grand a month out of it or roll it over.  I'm not particularly interested in sub 10% returns at this risk/effort level.

I'm also deeply concerned about the sudden dramatic increase in quoted default rates.  3%+ is quite a move!  Are they expecting defaults to rise significantly going forward or were they just seriously understating the risk?  I used to get an ROI of 13-14% with a small bundle of notes, now I'm having a hard time getting north of 10.5%.

Bummer, it looked like a good ride for a while, but success has done a number on the product.
Title: Re: LC RIP - Aug 2013
Post by: Dennis on August 16, 2013, 04:35:40 AM
I'm having the same set of issues.  Struggled to get 50k invested earlier last year and had to take a lot of low interest loans and relax my filter significantly and it still took three+ months to get it all in play.  Had no problems finding 10-15 loans a day after that for further investment and reinvesting.  My defaults are decent with my filters, and I'm getting a 12.6 NAR after about 18 months.

However, last couple of months I'm fighting to get one or two notes a day and half of them don't issue.  Between the institutional and autoinvests the 'good' notes I'm looking for disappear in minutes.  While a few months ago it was routine to see 200-400 notes in inventory, I'm seeing 25-40 at some points during the day.

I won't do the autoinvest because they don't allow the filtering I want (no low income, no high payment to income ratio, I don't mind 25-30k in debt but I'm not interested in 40k+, for example) and the surcharge would eat into my returns.

Definitely not seeing anything else out there to put money into.  The stock market seems to have hit its apex on the cycle, the bond market is headed for a wall, cash investments give negative returns, and real estate around my area has picked up to the point where some properties are selling for well above what they're worth...again.

LC is really starting to take more time than its worth at this point, and its not very productive for me anymore, unless I want to take lower interest loans or take on more default risk.  Its only a small part of my net worth, but it WAS a nice cash slush fund where I could pull a few grand a month out of it or roll it over.  I'm not particularly interested in sub 10% returns at this risk/effort level.

I'm also deeply concerned about the sudden dramatic increase in quoted default rates.  3%+ is quite a move!  Are they expecting defaults to rise significantly going forward or were they just seriously understating the risk?  I used to get an ROI of 13-14% with a small bundle of notes, now I'm having a hard time getting north of 10.5%.

Bummer, it looked like a good ride for a while, but success has done a number on the product.

You summarized (I believe) very well the concerns of me and probably many others here.  I have a VERY similar situation to you, but maybe I've been working a little harder as I'm still above water as far as my investment objectives go with P2P.  I will admit though, I've become a slave to the clock with the P2P application remittance times. 

I lend at both LC and Prosper.  While I'm still finding what I want at LC (albeit with an element of luck), Prosper on the other hand has presented a far greater challenge for me.  I'm still above water there with reinvestment, but adding new investment dollars is impossible now.  I don't know that things will get better anytime soon as investor demand seems to  increase with each passing month.  But I find for now that it is still worth my time to slave away as the returns I'm getting are far superior, based on risk and convenience, to anything else I'd be willing to invest in. 

I believe it is important to remember that achieving the excellent return you are currently receiving WILL attract a LOT of competition.  It's been easy for you and me, to get those returns up until a few months ago, because investment competition had been minimal due to the unknowns of P2P risk at the time.  Now that results are being proven, others want their piece too, and they are willing to work hard for it.  Are you?  My friend, anything worthwhile requires work.  Don't be disappointed that you've hit a benchmark of success and others want to follow.  Enjoy what you've achieved up to this point, but understand that the dynamics of P2P have changed, and either you change with it or it's over with for you.  I wish you the best of luck.       
Title: Re: LC RIP - Aug 2013
Post by: cfb on August 16, 2013, 12:43:53 PM
I believe it is important to remember that achieving the excellent return you are currently receiving WILL attract a LOT of competition.  It's been easy for you and me, to get those returns up until a few months ago, because investment competition had been minimal due to the unknowns of P2P risk at the time.  Now that results are being proven, others want their piece too, and they are willing to work hard for it.  Are you?  My friend, anything worthwhile requires work.  Don't be disappointed that you've hit a benchmark of success and others want to follow.  Enjoy what you've achieved up to this point, but understand that the dynamics of P2P have changed, and either you change with it or it's over with for you.  I wish you the best of luck.     

I wish you well also, as I think its going to get tougher.  My developing perspective on this is that spending an hour a day split over five to seven 5-10 minute periods to come up with 2-3 notes and then have one not issue isn't that productive, but on the other hand I have plenty of spare time.  Perhaps they'll draw more borrowers, hire more people to process the loans, and some people will lose interest in it.  I dropped 10k in about 5 months ago to increase my investment and thats increased to almost 17k with payments and interest.  I get a ridiculous rate of paying off the loans early.  In fact, my early payoffs are double in number what my defaults are.  I guess I'm picking people who don't need the money...

Amazing how fast the 'good' notes go.  I've had situations where I've seen nothing that passes my filters, refreshed and got one, then by the time I finished looking at it and decided to invest the note was sold out.

I guess the other alternatives is to take an autoinvest option and enjoy higher default rates, or take A-C notes and get lower returns.  Awful lot of risk to wade into for <8-9% though.

What I'm thinking is that I'll reduce my efforts to reinvest for now, take a look-see approach with how the # of notes in inventory goes (there were only 43 when I looked a few minutes ago), and plausibly let the thing wind down on its own over the next 3-5 years.  There's some chance that by then we'll be able to get a decent return from bonds or other cash investments, or at least the clean junk bond market might be giving a better return.